Dyads, triads, and the theory of exchange: Between liberty and coercion

Abstract

Economists commonly use the Edgeworth box to illustrate the ability of exchange to generate gains from trade. In contrast to this framework of dyadic exchange, we explore triadic forms of exchange where margins of coercion are also present. In the presence of triadic exchange, market transactions are no longer wholly voluntary and instead reflect an admixture of liberty and coercion. We illustrate triadic exchange in the context of credit markets, showing how continual turbulence is a sign of neither market failure nor government failure but is rather a systemic quality of triadic exchange as a system of societal governance.

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Notes

  1. 1.

    The presence of polity-based enterprises can also affect conflict resolution between market-based entities. This point is well illustrated by the behavior of young, quarrelling siblings. When do they turn to their parents for conflict resolution and when do they choose to overcome the conflict themselves? While a variety of factors may affect this decision, one thing we know for sure: proactive parents will hear about more conflicts than parents who believe in the children’s ability to overcome conflict. The presence of arbiter discourages the search for mutually beneficial outcome and changes the focus of the interaction. The conflicts over the initial allocation of resources and the terms of trade are now joined by the conflict over the sympathy of the arbiter.

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Correspondence to Richard E. Wagner.

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We are grateful to a referee for offering several helpful comments on an earlier version of this paper.

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Podemska-Mikluch, M., Wagner, R.E. Dyads, triads, and the theory of exchange: Between liberty and coercion. Rev Austrian Econ 26, 171–182 (2013). https://doi.org/10.1007/s11138-012-0180-x

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Keywords

  • Edgeworth box
  • Dyadic exchange
  • Triadic exchange
  • Coercive exchange
  • Credit markets as coercive exchange
  • Conflict and political economy

JEL Codes

  • D23
  • D51
  • D74
  • D86
  • P16